THE INDUSTRIAL TRIBUNALS

CASE REF:	524/04
699/04

CLAIMANTS:		Colin Charington
				William Ross Adams		

RESPONDENTS:		1.	Lomax Mobility Ltd
2.	Thompson Care Ltd
3.	Shiloh Mobility Ltd

DECISION ON PRE HEARING REVIEW
The decision of the tribunal in respect of the ten preliminary issues set out in the Case Management Discussion of 13 December 2005 is set out in the body of the decision.

Constitution of Tribunal:	

Chairman (sitting alone):		Mrs Crooke		

Appearances:

The first-named claimant was represented by Ms M Lewis, Barrister-at-Law, instructed by Jones and Cassidy, Solicitors.

The second-named claimant appeared in person and represented himself.
 
The first-named respondent was represented by Mr J MacMillen, Solicitor.

The tribunal was informed that the second-named respondent had gone into liquidation.
The third-named respondent was represented by Mr T Boyce, Barrister-at-Law, instructed by Walker Morris, Solicitors.
SOURCES OF EVIDENCE

The tribunal heard evidence from Mr Colin Charington and Mr William Ross Adams, the claimants.  Mr John Kerr Wilmot gave evidence on behalf of Lomax Mobility Limited the first-named respondent.  Mr Julian Cooke and Mr Richard Waterhouse gave evidence on behalf of the third-named respondent.

Additionally, the tribunal had before it a file of correspondence and documents which included the NHS contract, the loss of which had precipitated the proceedings before the tribunal.

ANALYSIS OF EVIDENCE

In general the tribunal preferred the evidence given by Mr Charington and Mr Adams and the evidence given by Mr Wilmot (insofar as it corroborated the evidence of both claimants), to the evidence given by Mr Cooke and Mr Waterhouse.  Where there was a divergence in the evidence given by Mr Wilmot and the two claimants, the tribunal preferred the evidence of the claimants as it was consistent with the documents before the tribunal.  The tribunal found the evidence given by Mr Cooke and Mr Waterhouse to be of lesser value because in certain areas it was hearsay evidence only and they did not appear to be the main decision-makers on behalf of the third-named respondent.

SHORT STATEMENT OF APPLICABLE LAW

When one employer proposes to transfer his business or part of it to another employer, then both employers should inform and consult with the relevant bodies about the proposed transfer and if and when the transfer of the business takes place, then the contract of employment of the employees concerned should be transferred automatically from one employer to the other.

The Transfer of Undertakings (Protection of Employment) (Regulations) 1981).    

CASE LAW

Jozef Maria Antonius Spijkers  -v-  Gebroeders Benedik Abattoir CV                          et Alfred Benedik en Zonen on 18 March 1986 EU case 24/85.

Schmidt -v- Spar-und Leihkasse der Fruhren Amter Bordesholm, Kiel und Cronshagen [1994] IRLR 302.

Dines & Others -v- 1.  Initial Healthcare Services Limited and 2.  Pall Mall Services Group Limited [1994] IRLR 336.

Duncan Web Offset (Maidstone) Limited -v- Cooper and Others [1995] IRLR 633.

Ayse Suzen -v- Zehnacker Gebaudereinigung Gmbh Krankenhausservice [1997] 11 March EU case c 13/95.

Betts and Others -v- Brintel Helicopters Limited and KLM Era Helicopters (UK) Limited [1997] IRLR 361.

ECM (Vehicle Delivery Service) -v- Cox and Others [1998] IRLR 416.

Wilson and Others -v- St. Helen’s Borough Council, British Fuels Limited -v- Baxendale and Meade [1998] IRLR 706.

University of Oxford -v- 1.  Humphries and 2.  Associated Examining Board [2000] IRLR 183.

Lightways (Contractors) Limited –v- Associated Holdings Limited [2000] IRLR 247.

RCO Support Services and Aintree Hospital Trust -v- Unison and Others.

Cheesman and Others -v- R Brewer Contracts Limited [2001] IRLR 144.

Oy Liikenne AB -v- Liskojarvi and Juntunen [2001] IRLR 171.     

Adi (UK) Limited -v- Willer and Others [2001] IRLR 542.

RCO Support Services and Another -v- Unison and Others [2002] IRLR 401. 

Abler and Others -v- Sodexho MM Catering Gesellschaft MBH and Sanrest Grobkuchen Betriebsgesellschaft MBH [2004] IRLR 168.

Astle and Others -v- Cheshire County Council and Another [2005] IRLR 12.

FINDINGS OF FACT IN RELATION TO PRELIMINARY ISSUES

1.	Whether there has been a relevant transfer for the purposes of Regulation 5 of the Transfer of Undertakings (Protection of Employment) Regulations 1981?

In reaching its decision, the tribunal has had particular regard to the guidance in the Cheesman case to establish whether or not there exists an “undertaking” and also the guidance to decide whether or not there was a “transfer”.

	A.	Was there an undertaking?  

(a)	Was there a stable economic entity whose activity is not limited to performing one specific works contract – an organised grouping of persons and of assets enabling or facilitating the exercise of an economic activity which pursues a specific objective?

	The tribunal finds in this case that there was such an entity.  The first-named respondent acquired the entity which eventually became the second-named respondent from a receiver.  The purpose of the entity which eventually became Thompson Care Limited was to perform the NHS contract for the repair, modification and maintenance of wheelchairs for Green Park Health Care Trust.  There was no real dispute between the various parties that fulfilling this contract took up approximately 97-97½% of the time and resources of Thompson Care Limited.  It generated the vast bulk of Thompson Care Limited’s revenue.  Thompson Care Limited carried out some work for additional bodies in the health care field, but this was on an extremely small scale.  Approximately 20 persons were employed, and the vast majority of the contract was performed in Northern Ireland.  A small amount of work was carried out in Scotland.  There were premises in Northern Ireland and for the most part any tools required were those carried by the field service engineers.  

	(b)	Was the undertaking sufficiently structured and autonomous but not necessarily having significant assets tangible or intangible?

The tribunal finds that Thompson Care Limited was a largely autonomous entity.  Mr Charington oversaw the day-to-day management of the contract between Thompson Care Limited and Green Park Health Care Trust.  He managed the staff;  he liaised with the management of the Trust;  he dealt with complaints;  he managed the ordering, supply and maintenance of stock.  Effectively, Mr Charington ran Thompson Care Limited, reporting to the first-named respondent as required.  

	(c)	Was this an activity essentially based on manpower?      

The contract was for the repair, modification and maintenance of wheelchairs.  Therefore the tribunal finds that it is largely an activity based on manpower, albeit skilled manpower.

	(d)	Was there an organised group of wage earners specifically and permanently assigned to a common task?

The tribunal finds that there was a work force of 20 persons engaged very largely on the Green Park Health Care contract.  There was a tiny percentage of other work, but in terms of the revenue generated and the time taken, the tribunal considers these factors insufficient to disprove the existence of a discrete entity.  Neither does the tribunal consider it to be of relevance that payroll and human resources functions were carried out by Lomax, the first-named respondent, in Scotland.  This situation is no different to a situation where a company has a number of outlets, with management of all the outlets being concentrated at a head office.  

	(e)	The question of the identity of an entity emerges from factors such as its workforce, management staff, the way in which work is organised, operating methods and where appropriate, operational resources available to it.    

Thompson Care Limited was a wholly owned subsidiary of Lomax Mobility with Thompson Care Limited being a separate legal entity operating out of premises in Belfast.  Lomax, the first named respondent, was the ultimate decision maker and payee under the contract.  Thompson Care Limited did not have its own bank account.  However, to deliver the repair service,  Thompson Care Limited had a call centre;  a centralised work shop;  field service technicians with vans and a central store.  Day-to-day management was by Mr Charington.  If a routine service request came through, it was dealt with through Belfast.  There was no need for reference to Scotland on the essentials of the contract.  For the essentials of the contract, there were technicians operating out of the Belfast Depot.  For all intents and purposes, the contract was performed out of the Belfast Depot and throughout Northern Ireland.  

	B.	Was there a transfer?
			
			Did the entity retain its identity?

			Was the operation actually continued or resumed?

(a)	The tribunal finds that the operation of the contract was effectively continued albeit in different hands.  The tribunal did not accept the arguments to the contrary by the third-named respondent which cited seven alleged points of difference between the performance by the first-named respondent and the performance by the third-named respondent.  Two of these points related to the tiny percentage of private work.  If the question is put – could Thompson Care Limited have survived by the private work alone, with the answer being that this was not in the least likely, then the tribunal is able to find that these “add ons” were purely incidental to the main business which was to service the Green Park Health Care Trust contract, and as such, not relevant to that activity.  As it is the case that these “add ons” were of such a minimal nature they could not be considered sufficient to dislodge a finding that the business transferred was the same both before and after the transfer.  The tribunal found no evidence to suggest that Thompson Care Limited had existed as a private sales and maintenance provider prior to the Green Park contract or that it operated as a sales outlet for Lomax Mobility products providing a regional base to service Lomax’s 70% market share in Northern Ireland.  There was certainly a member of Lomax staff based at the Belfast premises, but there was no evidence to connect her to a servicing of Lomax’s alleged 70% market share, or any evidence as to what benefit this may or may not have had to Lomax.  

	A very small percentage of work may have been referred to Scotland, but again the tribunal finds that this would be insufficient to displace a finding that there was an economic entity in Belfast which was transferred.  One small difference in the service provided for different classes of wheelchairs, similarly does not of itself prove to be enough to displace the finding that there was an undertaking transferred.

(b)	In a labour intensive sector it is to be recognised that an entity is capable of maintaining its identity after it has been transferred were the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specifically assigned by his predecessor to that task.

	In this case a decision was taken by the third-named respondent that the Transfer of Undertakings (Protection of Employment) Regulations did not apply.  The tribunal did not accept the evidence of Mr Cooke and Mr Waterhouse that the decision remained open from the time of being awarded the contract through to the actual takeover date.  If this really had been the case, the tribunal considers that the third-named respondent would have acted in a very different manner than it actually acted towards the employees of the first-named respondent.  

	This factor is of less relevance in this case as 6 employees out of the total potential workforce of 19/20 employees, were taken on as part of a recruitment exercise by the third-named respondent.  As such, the tribunal regards this as a factor to be weighed in the overall balancing exercise to be carried out.  

(c)	All factors characterising the transaction must be considered, but none is to be considered in isolation.

	If there is one salient point to be distilled from the case law in this area, it is that tribunals must consider all factors in the case.

(d)	The type of undertaking, whether or not tangible assets are transferred, the value of intangible assets whether or not the majority of employees are taken over, whether or not customers are transferred, degrees of similarity of activity before and after transfer, and the period, if any, in which they are suspended.

	The customer database was transferred between the first-named and third-named respondent.  

	The tribunal did not receive any direct evidence about the value of the intangible assets at the time of transfer.  As previously found, only six employees were taken over and this was by a recruitment exercise rather than a direct TUPE transfer.  In this case the Green Park Health Care Trust transferred, and it was the one customer in respect of the relevant contract.  The tribunal has already made findings concerning the similarity of activity before and after transfer.  On the basis of the evidence of the second-named claimant, Mr Adams, the tribunal finds that the period of suspension of activities was negligible to non-existent.  During the last few weeks of the currency of the contract for Lomax, Mr Adams experienced a situation in which on arriving at his calls, he was told that a representative from the third-named respondent had already called.

(e)	Importance attached to various criteria will vary according to activity taken on.

	It was not alleged that any highly specialised plant and machinery was required to carry out the contract.  Obviously, if this had been the case, a failure to transfer assets would have been of more importance in deciding whether or not there was a transfer of an undertaking in this case.  The tribunal is placing more importance upon the similarity of the type of work done before and after transfer and the numbers of employees required being virtually identical.  

(f)	Where an economic entity is able to function without any significant tangible or intangible assets, the maintenance of its identity following the transaction being examined cannot logically depend on the transfer of such assets.

		The tribunal restates the points made in the Paragraph B(e) above.  

(g)	Even where assets are owned and required to run an undertaking, the fact that they do not pass does not preclude a transfer.  

	This factor is of less assistance in determining the issue as the tribunal has already found no significant plant and machinery was required to perform this contract.

(h)	Where maintenance work is carried out by a cleaning firm and then next by the owner of the premises, that mere fact does not justify the conclusion that there has been a transfer.

	This is not a relevant factor in this case as the maintenance work for this contract never became an “in-house” operation.

(i)		The mere fact that the service provided by the old and new undertaking providing a contracted out service or the old and new contract holder are similar does not justify the conclusion that there has been a transfer of an economic entity between predecessor and successor.  

	Effectively this restates the basic message distilled from the case law which is that all factors have to be considered.  An additional fact noted by the tribunal is that the terms of the contract provided for the possibility of a TUPE transfer as follows:-  

“At the end of the contract period the contractor shall be required to provide workforce information with a view to releasing this information to bona fide tenderers to enable them to price for the implications of TUPE applying”.   

	This is a marker that the regulations could apply.  (At least in the view of the NHS Trust)

(j)	Absence of a contractual link may be evidence that no transfer took place but it is not conclusive as there is no need for a direct contractual relationship.

	In a competitive tendering situation, there is certainly no need for any direct contractual relationship to exist for a transfer to be possible.

(k)	When no employees are transferred the reasons why that is the case can be relevant.

	In this case, the tribunal has already found that the third-named respondent took a decision that the Regulations did not apply.  It is hard for the tribunal to avoid the conclusion that this was a somewhat arbitrary decision, as the actual decision maker, Mr Dootson was not available to give evidence to the tribunal.  It was common case that no information was sought until a relatively late stage, and certainly never seemed to be offered voluntarily by the first-named respondent.  The tribunal has already made findings that it does not accept the alleged seven points of difference between the service provided by the first-named respondent and the service provided by the third-named respondent, and as a consequence that TUPE applied.  At the very least good industrial practice required an early contract between the first-

named and third-named respondents.  This did not happen and the first-named respondent’s employees were ill-served as a result.

(l)	The fact that the work is performed continuously with no interruption or change in the manner of performance is a normal feature of transfers.  In this case the work was transferred in a reasonably seamless fashion.  There was not any actual gap between the two contracts.

	However, the purpose of the Transfer of Undertakings (Protection of Employment) Regulations is to protect existing employment.  As a matter of policy, employers should not be allowed to avoid the regulations.  For some time it was feared that the Suzen case could allow a transferee to cause the regulations to be disapplied by refusing to take on the workforce.  The apparent conflict between the Suzen decision and the previous Schmidt decision was resolved by the EAT in the ECM (Vehicle Delivery Service)
 -v- Cox and Others case in which the Employment Appeal Tribunal found that an economic entity exists as distinct from a mere activity, where the employees concerned are dedicated to a particular contract and their continued employment is contingent upon the continued existence of the service contract.  There is no transfer of a business where the loss of a customer does not of itself result in dedicated and identified staff losing their employment.  This analysis is helpful in resolving the present case.  Here, the employees concerned were for approximately 97% of their time dedicated to the Green Park Health Care Trust contract.  That contract was the prerequisite for employment continuing.  Could the business have survived on the “add ons”?  There would simply not have been enough work to justify the employment of 20 people, based on the evidence that the revenue gained from the “add ons” would have been an extremely small percentage of overall income.  Therefore considering all the Cheesman factors both in relation to the issue of whether or not there was an undertaking and the issue of whether or not it transferred, the tribunal finds that applying the ECM test there was an economic entity which retains its identity after the transfer, in that customers and work done were essentially the same, and a relevant transfer took place.

2.	If the answer to one is yes, does regulation 5 of the 1981 Regulations apply to the claimants’ contracts of employment?      
   
	Regulation 5 provides:-

	        “(1)	Except where objection is made under paragraph 4(a) below, (not relevant in this case) a transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred for any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as is originally made between the person so employed and the transferee”.

	In this case, but for the transfer of the wheelchair contract from the                        first-named respondent to the third-named respondent, both claimants would still have been employed. 

3.	Where does the liability lie in respect of the claimants’ complaints?   

Regulation 5 provides that any contract which would have been terminated by the transfer will have affect after the transfer as if it was made between the employees and the transferee.  Where there is a relevant transfer to which regulation 5 applies, the liability will lie with the transferee (in this case the third-named respondent).  The Regulations provide for an automatic transfer. 

4.	Whether Lomax Mobility Limited or Thompson Care Limited were the claimants’ employers prior to termination.

The tribunal finds that both claimants were employed by Lomax Mobility Limited but assigned to work in Thompson Care Limited.  Both claimants have contracts of employment in which their employer was identified as being Lomax Mobility Limited.  All associated contract documents such a company handbook were issued by Lomax Mobility Limited.  The tribunal does not accept Mr Wilmot’s misguided attempt to pass off the fact of the contract documents identifying Lomax as the employer, as an administrative error.  Mr Charington for example was the general manager of Thompson Care Limited.  In the event, he was sacked by Mr Wilmot.  If Mr Wilmot had the power to do that, how can he argue that Mr Charington was not an employee of Lomax Mobility Limited?  The position with Mr Adams is similar.  On the instructions of Jacqueline Etherson (an employee of Lomax in Scotland), Mr Charington printed off the letter of 24 November 2003 which effectively dismissed Mr Adams from the first-named respondent when he was informed his contract of employment would transfer to the third-named respondent.  If Lomax had no control over Mr Adams then it would not have been able to take this action.

5.	Whether Mr Charington was part of a work group which transferred at the time of the alleged transfer on 15 January 2004.

Aside from any negotiations to the contrary with Lomax during December 2003, by the time of the transfer on 15 January 2004 it was clear that Mr Charington had no future with Lomax and would be transferring along with the rest of the employees.  There was nothing in the evidence to suggest any objection by Mr Charington.  Sub Paragraph 4a of Regulation 5 provides that “an employee shall not transfer his contract of employment, if the employee informs the transferor or the transferee that he objects to becoming employed by the transferee”.  Some positive action is required, and in this case there was none by Mr Charington.  Accordingly, he transferred to the third-named respondent.

6.	Whether there was conversation by Mr Wilmot and Mr Charington on 16 December 2003?

It was common case that there was a conversation.  As to the exact contents of the conversation, there was a divergence in the evidence.  

7.	Whether Mr Wilmot offered Mr Charington a role with Lomax Mobility Limited?

On the balance of probabilities, the tribunal finds that it is more likely than not that such a role was offered.  If a role for Mr Charington was not envisaged at that time, then the tribunal can see no reason for him to be asked to inspect new sites for the future operation of Lomax Mobility Limited.  If a role for Mr Charington was not contemplated, there would have been absolutely no need for him to be involved in looking at other sites.

8.	Whether the scope of the service contract with Green Park Trust was different before or after 15 January 2004?

For the reasons already stated the tribunal has found the scope of the contract to be substantially the same.

9.	Whether the range of work provided by Thompson Care Limited/Lomax was wider than that for which Shiloh offered?

For the reasons already set out, the tribunal finds that the range of work was substantially the same.

10.	Whether the service provided by Thompson/Lomax was a discrete entity prior to 15 January 2004?

For the reasons set out above the tribunal finds that it is.   

SUMMARY

The tribunal finds that there was a relevant transfer of the entity known as Thompson Care Limited and responsibility for the employees’ contracts of employment passed to the third-named respondent.

Chairman:

Date and place of hearing:	23 – 25 January 2006 and 
16 February 2006 at Belfast		

Date decision recorded in register and issued to parties: